IP Q2 Earnings Beat Estimates, Decline Y/Y on High Maintenance Costs

Net sales declined 2.2% year over year to $6.00 billion and missed the consensus mark of $6.17 billion by 2.7%. North American box volumes rose 1.7% in the quarter. 

IP's Profitability Declines on Outage Costs

Cost of products sold decreased 1.8% year over year to $4.34 billion. Gross profit was down 3.5% year over year to $1.66 billion. The gross margin came in at 27.6% compared with the year-ago quarter’s 28%. Selling and administrative expenses increased 7.4% to $564 million, while distribution expenses rose 1.4% to $523 million.

Adjusted EBITDA from continuing operations fell 12.4% year over year to $587 million on expected higher maintenance outage costs. The adjusted EBITDA margin contracted to 9.8% from 10.9%. Adjusted operating income declined 58.6% to $99 million from $239 million in the prior-year quarter.

International Paper's North America Sales & Profits Fall Y/Y

The Packaging Solutions North America segment’s sales were $3.69 billion, down 4.5% year over year but up 1.7% sequentially. Our projection for the segment’s sales was $3.77 billion. 

The segment’s operating profit declined 26.4% year over year to $204 million. Adjusted EBITDA fell to $425 million from $515 million, while the margin contracted to 12.2% from 13.9%. Higher planned outage costs and lower export volumes outweighed favorable pricing, mix and improved mill performance. Our projection for the segment’s operating income and adjusted EBITDA was $169.7 million and $385.7 million, respectively.

IP's EMEA Business Remains Under Pressure

Packaging Solutions EMEA sales were $2.29 billion, nearly flat with the prior-year quarter. Our expectation for the segment’s sales was $2.36 billion. 

The segment reported an operating loss of $80 million compared with a loss of $1 million a year ago. Adjusted EBITDA decreased 6.2% to $182 million, and the adjusted EBITDA margin narrowed to 8% from 8.5%. Higher paper costs within packaging, distribution expenses and weaker volumes offset energy-cost benefits and cost-reduction actions.

Our projection for the segment’s operating income and adjusted EBITDA was a loss of $90.1 million and $158.9 million, respectively.

International Paper's Free Cash Flow Weakens on Higher Capex

Cash provided by operating activities increased to $526 million from $476 million in the year-ago quarter. However, capital expenditures rose to $533 million from $422 million. This led to a free cash flow of a negative $7 million against positive $54 million a year earlier. 

IP Sets Third-Quarter EBITDA Target

International Paper expects third-quarter adjusted EBITDA from continuing operations between $780 million and $830 million. The outlook includes an estimated $85 million negative impact from the temporary suspension of operations at the Pine Hill mill for roof repairs.

Packaging Solutions North America adjusted EBITDA is projected between $555 million and $585 million, including the Pine Hill impact. Packaging Solutions EMEA adjusted EBITDA is expected between $230 million and $250 million.

International Paper Maintains 2026 Targets

For 2026, management targets adjusted EBITDA from continuing operations of $3.20-$3.40 billion. The company expects Packaging Solutions North America adjusted EBITDA of $2.35-$2.45 billion and Packaging Solutions EMEA adjusted EBITDA of $900 million-$1 billion.

International Paper projects full-year net sales of $24.5-$25.1 billion and free cash flow of $300-$500 million. Capital expenditures are targeted between $2 billion and $2.1 billion, while maintenance outage expenses are forecast at $431 million.

IP Advances Strategic Investments and Separation

The company completed the NORPAC acquisition in June and the acquisition of a converting facility from Delmarva Corrugated Packaging in Dover, DE, in May. It also finished the Riverdale machine conversion, with the ramp-up progressing as expected. Operations at the Waterloo greenfield packaging plant are scheduled to begin in the fourth quarter.

In EMEA, International Paper has announced more than $210 million of run-rate savings tied to footprint and headcount actions. The planned separation of the North American and EMEA packaging operations remains on track with the previously announced timeline.

IP Stock’s Price Performance

The company’s shares have lost 19.4% in the past year compared with the industry’s 8.3% decline.

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International Paper’s Zacks Rank

IP currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Industry Peers This Quarter

Packaging Corporation of America PKG reported second-quarter 2026 adjusted earnings of $2.35 per share, falling 5.2% year over year but beating the Zacks Consensus Estimate of $2.31. 

Packaging Corp’s sales increased 14.7% year over year to $2.49 billion and surpassed the consensus estimate of $2.40 billion by 3.6%. Total corrugated products shipments reached an all-time quarterly record, rising 24.3% both per day and in total from the prior-year quarter.

Smurfit Westrock Plc SW reported second-quarter 2026 adjusted earnings of 35 cents per share, down 20% year over year. The figure missed the Zacks Consensus Estimate of 42 cents by 16.7%. Higher input costs, particularly freight, pressured profitability.

Smurfit Westrock's net sales increased 1.1% year over year to $8.03 billion and surpassed the consensus estimate of $7.99 billion by 0.5%.

A Paper & Related Product Stock Awaiting Results

Rayonier Advanced Materials RYAM is expected to release second-quarter 2026 results on Aug. 4. The Zacks Consensus Estimate for the bottom line is pegged at a loss of 17 cents per share. The company incurred a loss of 43 cents per share in the year-ago quarter.

The consensus estimate for Rayonier Advanced Materials’ top line is pegged at $357.5 million, indicating 5.5% growth from the prior-year reported figure.

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